It is often attractive for German companies to use specialised freelancers from abroad. This is not just a temporary trend, because the German labour market clearly shows a steady increase in the number of foreign freelancers. Flexible project managers from EU non-member states are much sought-after employees, especially in the IT sector.  

If German companies want foreign freelancers to work for them, they must obtain a residence permit under s4a paragraph 5 of the German Residence Act. This article deals with the requirements for obtaining a residence permit for self-employment. 

All nationals of an EU member state enjoy freedom of establishment and freedom to provide services within the territory of the Union. EU citizens can pursue self-employment or temporarily provide services in Germany under the same conditions as Germans. Trade regulations must of course be respected; but there is no separate work permit needed. 

In order to take up self-employment, EU foreigners generally require a residence permit for self-employment in accordance with s21 of the German Residence Act. This must be applied for either at the German mission abroad (embassy or consulate) in the freelancer’s home country or country of residence or, in certain cases, at the responsible foreign nationals office in Germany. 

Self-employed activity within the meaning of s21 of the German Residence Act is, in contrast to an employment relationship, characterised by an independent position vis-à-vis the company as well as independent organisation and responsibility in relation to clients; unlike employees, they carry the business risk. They organise their working time freely and make autonomous decisions. This is typical for so-called freelancers. The distinction between freelance work and dependent employment is essential to make a distinction under German immigration, social security and labour law. 

Companies that decide to use the services of self-employed freelancers must ensure that freelancers providing services to them obtain a residence permit which allows self-employed activity under s4a, paragraph 5 of the German Residence Act. Any residence permit indicates the extent to which gainful employment is permitted (s4a paragraph 3 of the Residence Act). If the foreign national cannot show a residence permit that allows for his/her self-employed services to be provided, the foreign national cannot be commissioned to provide the service. If s/he is nevertheless commissioned, the company and the foreign national both face a risk of high fines, among other penalties. 

A residence permit for self-employed work in Germany can be issued to freelancers by the foreign mission or foreign nationals office pursuant with s21 paragraph 1 of the German Residence Act if: 

• There is an economic interest or a regional need for the self-employed activity. 
• Positive impact on the economy is to be expected. 
• The financing of the implementation is secured by equity capital or a loan commitment. 

All of these conditions must be met. The decision to grant a residence permit is within the discretion of the responsible authorities. The law specifies the following criteria to be considered in the discretionary decision: 

• viability of the underlying business idea; 
• the foreign national’s experience in business; 
• amount of invested capital; 
• employment and training opportunities; 
• contribution to innovation and research. 

In making the decision, the responsible authority has to respect the legislative goal of facilitating the immigration of foreign self-employed individuals with good and desirable business ideas. 

Section 21 of the German Residence Act provides for some special cases for obtaining a residence permit, which we will briefly summarise below:  

• According to the wording of s21 paragraph 4 of the German Residence Act, the residence permit for the purpose of self-employment is granted for a maximum period of three years. It is actually intended that a settlement permit for the purpose of permanent residence and unlimited labour market access (s9 of the German Residence Act) will be granted upon its expiry, provided the foreign national successfully carries out the planned activity and his/her necessary income is sufficiently secure. 
• Section 21 paragraph 2a of the German Residence Act enables graduates of German universities to take up self-employment in connection with knowledge acquired during their studies. 
• An exception is also provided for foreign nationals working in the so-called ‘free professions’ (s21, paragraph 5 of the German Residence Act), as they will generally not be able to fulfil the requirements of s21, paragraph 1 of the German Residence Act. People in free profession are those who provide ‘services of a higher kind’ on the basis of special professional qualifications and creative talent, e.g. doctors, lawyers, writers, artists, but usually also engineers and full-time experts. If a special professional permit is required for certain free professions, such as pharmacists, tax advisors or doctors, this must also have been granted. 
• Foreign nationals who already live in Germany and hold a residence permit for other purposes (such as foreign students with a student visa) may be permitted to pursue self-employed activities in the form of an additional provision while retaining their existing purpose of residence. The only additional requirement would be that professional and trade regulations are complied with (s21 paragraph 6 of the German Residence Act). 
• Agreements under international law have been concluded with some EU non-member states to facilitate obtaining a residence permit for the purpose of self-employed activity. Intergovernmental agreements such as friendship, trade and settlement treaties with clauses on the preferential treatment or goodwill clauses facilitate the granting of a residence permit in individual cases (s21 paragraph 2 of the German Residence Act). 

• Foreign nationals aged over 45 can only be granted a residence permit if they have adequate pension coverage (s45 paragraph 3 of the German Residence Act).  

Residence permits for self-employed activities are granted within the discretion of the responsible authorities. Companies should carefully check whether foreign nationals they consider hiring in Germany have a residence permit which permits the desired self-employed activity and also, whether the activity in fact constitutes self-employment under German law rather than employment. If the foreign candidate does not possess the required permit, it must be applied for prior to commencing the activity, taking into account the criteria described above. 

Many thanks to Jana Schön (research assistant in the Berlin office of KLIEMT.HR Lawyers for her assistance in preparing this article.